The government is speeding up the preparation of detailed legislation for the introduction of a fund-type retirement pension, with ongoing discussions about the roles and requirements of trust corporations, which are central to the system. Concerns are rising in the industry about the uncertainty of securing profitability as the number of initial operators is likely to be limited.
According to the retirement pension industry on June 24, a working group formed by the Ministry of Employment and Labor is holding weekly meetings to discuss the specifics of the system, including the requirements for trust corporations.
A key focus for the financial investment sector is the criteria and roles of open-type trust corporations. The fund-type retirement pension is set to be introduced in three forms: open-type managed by financial institutions, consortium-type involving multiple companies, and public-type centered around public institutions.
So far, there is a growing inclination to limit the number of open-type financial institution operators. Industry estimates suggest that only about five operators may receive approval, interpreted as an effort to establish the system with operators capable of competing with existing contract-type retirement pensions.
However, there are concerns that limiting the number of operators may conflict with the system's intent to expand employee choice.
Regarding the role of trust corporations, another contentious issue in the system's design, consensus has yet to be reached. Trust corporations are independent organizations established to manage and supervise funds on behalf of workers.
Some argue that trust corporations should handle all operations from recruiting members to managing reserves, while others contend that if the entity responsible for oversight also manages the funds, its independence could be compromised.
As the requirements for trust corporations remain unclear, private financial firms are increasingly concerned. Significant initial investments are needed to participate in the fund-type market, including establishing separate organizations, IT systems, and securing personnel, yet profitability remains uncertain.
Particularly, as the Ministry of Employment and Labor is reportedly leaning toward designing the fund-type system with a focus on public interest distinct from existing contract types, industry insiders worry that without a guaranteed reasonable fee structure, the incentive for participation could significantly diminish.
An industry representative stated, "With the requirements for trust corporations, fee structures, and business frameworks still not clearly defined, operators find it difficult to decide on participation. Given the substantial initial investment burden, there are concerns that without a sustainable profit structure, it could lead to a 'winner's curse.'"
Meanwhile, the government has been pushing for the introduction of the fund-type retirement pension following discussions by the Pension Reform Special Committee under the Economic, Social and Labor Council at the end of last year. After forming an expert advisory group in March, it is currently reviewing detailed legislative measures through the working group. The industry anticipates that a concrete proposal may be released by the end of July.
* This article has been translated by AI.
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